Assets and Liabilities

Someone from your friend circle must have gone into that chain marketing thing. Someone from this chain marketing must have asked you to come along with him/her to one of the seminars to experience it firsthand and witness what made them go for it. You must have ignored the plea because you have heard so much of it from various media and people that it is shear bullshit. Well it may be. But, have you wondered what is it really about. Why did someone start it and why is it still going on? The answer my friend is very simple, it makes you invest money instead of spending it. Not a very bad deal. The problem here is the aftermath. A lot of companies started this chain marketing and then flew away with the money of supporters and spread hatred for the whole idea.

This same person who invited you to look into chain marketing must have asked you to read the book Rich Dad Poor Dad. I don’t know whether you should go for this marketing thing or not, however, you should definitely read Rich Dad Poor Dad. This is one amazing book by Robert Kiyosaki. This book teaches you the basic difference between Assets and Liabilities.

Here is a video which will explain the concept to you.

Because many of you will never go through that link, let me give you a write up about it.

Assets and liabilities are two ways in which you can spend your money. That hard earned money which you really need to understand about.

Thanks to a good friend of mine who understands this concept and his will to make me understand it, I know what assets and liabilities are. Not that I am doing very good about this concept myself, I would really like you to know the difference. And FYI, this Friend who introduced me to this concept behind textbook definition, he went ahead to start a company of his own and earns way more then me in the same period of time we both had to make our marks.

Let me start with Liabilities. Liabilities are the things you spend your money on and never see that money boomeranging back to you in an increased form. Liabilities will be the Zara jacket you bought or the Adidas originals you so eagerly waited for. Liabilities is the bike you purchased after months or years of EMI installments and also the iPhone you purchased after months of savings. Liabilities basically is anything you spend your money on which will never help you make more money.

Assets on the other hand is also a way for you to spend money. This money however holds the potential to grow more money for you. Assets would be the flat you purchased after years of efforts. This flat is viable to be given on rent and make you money for all your life. Assets would be shares and bonds you purchased because of your dad’s persistence and now have shot up and you are liable to a lot more money then you ever invested. Assets is anything you spend your money on which will make you more money in the future.

The basic reason why should you even consider this concept is because it is for your own good. The more you invest in Assets instead of Liabilities, the more money you will have in future. It doesn’t really matter how much money you have or earn. What matters is how you spend it. If your income is as low as 20K a month, you will end up spending half of it on necessary expenditures like rent, food and petrol. After this first round of leaching is done, you are still left with around 10k each month. Now there are two ways in which you can spend this money. You can either spend it buying new clothes and gadgets or you can invest this money and buy this same clothes and gadgets when the assets you hold come around with newly formed money for you. The second process is a little lengthy in terms of acquiring your loved goodies but is way more smarter.

Most of us already know this but don’t really think about it much and very few of us really implement. I plan to take this advice by my friend seriously and wish to make a empire of my assets instead of making an impression by my Liabilities which won’t last long. That Zara jacket is going to get worn out one day and you are going to stop wearing it. You will buy another one. Let’s hope this next one comes from the money you make by investing in Assets instead of using your income to purchase this things and making them your Liabilities. I hope this helps. I hope you do something like this.

By the way, this friend who helped me understand this concept is Abhishek Tiwari who is a proud CEO of Texture Inc, a software company.

Think. Do.